Who is Newman listening to when it comes to construction?

by Comment by Bill Hoffman

30th Jul 2014 6:00 AM

JUST two days after the Stafford by-election, while Premier Campbell Newman was extending his mea culpa to the people of Queensland, a parliamentary committee was hearing about business as usual in the Sunshine State.

The construction industry is arguably like no other business.

Work is won by big building companies that manage contracts and payments from clients but to all intents and purposes do little actual construction work.

That work and the supply of materials to affect that work is done by small to medium sized sub-contractors, often mum and dad businesses, who the system ruthlessly exposes to the ethical standards and financial state of the principal contractor.

Unlike banks and other financing institutions, sub-contractors are the unsecured creditors on every project.

In normal circumstances they will have undertaken 60 days of work for which they also supply materials, before they receive a progress payment.

Many principal contractors quote on tight margins. Sub contractors say the industry is rife with those that then try to extend that margin by screwing them.

There is a power imbalance. Principal contractors are paid by clients who expect that money will be applied to the job at hand.

Insolvency in the Australian construction industry runs to $3.4 billion a year.

There are high powered lawyers, accountants and in case compliant liquidators in every capital city that feed on that opportunity.

Money can be shifted from projects to bank accounts and on to trust funds. Sub contractors, always the last to be paid, lose their homes while the top of the food chain changes its business name and moves on.

The Building and Construction Industry Payments Act was meant to give subbies a dispute resolution process to speed up the flow of money owed to them for work done.

To a large extent it has worked although last year's Walton's Construction collapse shows it is not the total answer to the industry's woes.

That would best be provided by introducing project trust funds that isolate client payments to the job they were intended for and would limit their ability to apply revenue from one project to expenses for another. That should be, but isn't, a crime.

The Newman Government, after coming to power in 2012, set about cutting red tape and removing regulation.

His report included recommendations that will re-enforce the power imbalance.

They were based on the untested allegations of bias from parties representing principal contractors and ignore the government's own data that shows no bias exists.

The data was explained to the July 21 sitting of the Transport, Housing and Local Government Committee by Gold Coast barrister Jonathon Sive who said it showed that any bias in the system continued to favour principal contractors.

It is advice the Housing Department should have provided itself, moving LNP Member for Algester Mark Shorten to accuse public servants of misleading the committee.

The amendments are due to be legislated in September.

The question that has to be asked; is the Newman Government listening and if so to who?